Hard Ltd acquired 3,200,000 of the ordinary shares of Soft Ltd on 1st October 2010. The consideration was agreed as follows: GHC5 million immediate cash payment and additional GHC1 million to be settled on 1st October 2013. A year later, Hard Ltd acquired 800,000 of the ordinary shares of Active Ltd for GHC1,600,000. The cost of capital to Hard Ltd is 25% per annum. The statements of financial position of the three companies as at 30th September 2012 are as follows: Hard Ltd Soft Ltd Active Ltd GHC000 GHC000 GHC000 Non Current Assets: Patent 500 840 - Freehold land 5,120 2,800 1,600 Plant 2,840 1,800 1,080 Investments: In Soft Ltd 5,000 - - In Active Ltd 1,600 - - In others 300 400 120 15,360 5,840 2,800 Current Assets: Inventories 1,140 800 600 Accounts receivable 840 760 800 Bank -__ 300 240 1,980 1,860 1,640 Current Liabilities: Accounts payable 1,100 660 560 Taxation 680 240 120 Bank overdraft 160 - - 1,940 900 680 Net Current Assets 40 960 960 Deferred tax (400) - (160) Net assets 15,000 6,800 3,600 Equity: Stated capital Ordinary shares (issued at GHC0.50) 4,000 2,000 1,000 Capital surplus 2,000 1,000 200 Retained Earnings 9,000 3,800 2,400 15,000 6,800 3,600 Additional information: i. The Retained Earning balances of the three companies were: Hard Ltd Soft Ltd Active Ltd GHC000 GHC000 GHC000 1/10/2010 4,000 2,400 1,000 1/10/2011 6,000 3,000 1,600 ii. At the date of acquisition, the fair values of Soft Ltds net assets were equal to their carrying amounts with the exception of a plot of land that had a fair value of GHC400,000 in excess of its carrying amount. This fair value adjustment has not been reflected in the financial statements of Soft Ltd. iii. On 28th September 2012, Hard Ltd processed an invoice for GHC100,000 in respect of an agreed allocation of overhead expenses to Soft Ltd. At 30th September 2012, Soft Ltd had not accounted for this transaction. Prior to this, the current accounts between the two companies had been agreed at Soft Ltd owing GHC140,000 to Hard Ltd. These had been included in debtors and creditors respectively. iv. During the year, Active Ltd sold goods to Hard Ltd at a selling price of GHC280,000 which gave Active Ltd a profit of 40% on cost. Half of these goods remained in stock at 30th September 2012. v. An impairment review of the goodwill on acquisition of Soft Ltd on 30th September 2012 revealed that goodwill has suffered loss of 25%. vi. There has been no additional share issue since the acquisitions. Required: (a) Prepare Consolidated Statement of Financial Position of Hard Ltd as at 30th September 2012. (16 marks) (b) Under what circumstances will an entity be compelled to prepare Consolidated Financial Statements even though it holds less than 50% of the ordinary shares of another company? (5 marks) (c) Under what circumstances will an entity be exempted from preparing Consolidated Financial Statements even though it holds more than 50% of the ordinary shares of another company